15. Telegram From the United States Delegation at the North Atlantic Council Ministerial Meeting to the Department of State1

Secto 21. Department pass Defense. Subject: Support Costs. German Finance Minister Schaeffer and Defense Minister Blank met with British, French and American delegations December 16. British representative Selwyn Lloyd, Minister of Defense, and Boyle, Economic [Page 45] Secretary of Treasury; French Finance Minister Pflimlin; and US Secretary Wilson and Assistant Secretary Gray.

Lloyd chaired meeting. Stated that British intend maintain high quality defense position but in light of limited finances, foreign exchange problems and general strained condition of economy was essential to know how much troop support would be continued after May 5, 1956. Had delayed suggesting meeting with Germans until after German NATO submission. Felt determination of extension of support costs should be based upon equitable sharing of burdens in NATO. Any inequitable arrangements would lead to political strains and weaken NATO alliance. Stated it seemed possible for Germans “next year” to spend “fair” portion on own forces. Accordingly felt extension of support costs appropriate. Stated that failure to reach agreement on adequate level might have effect upon British defense level. Emphasized that British situation so tight that there was little room for maneuver.2 Asked Schaeffer whether he accepted general approach.

Schaeffer stated that Germans under EDC had accepted idea of short transitional period for support costs in order to help obtain ratification. It was always clear that amount would decrease towards zero. Under EDC FedRep would have been treated on non-discriminatory basis. Non-discriminatory aspect essential to obtain public support in Germany for EDC.

At London 1954 Germans agreed to extend support costs for limited period and also to negotiate on need for supporting allied forces in Germany.3 Unlike 1952 Agreement, Paris agreement did not contain obligation to provide continuing obligation to support visiting forces. Thus Germans had no obligation for any additional lump sum payment. (Schaeffer later argued even cash payment contrary to Article 4, Section 4 of Finance Convention.)4

German main obligation under current agreements is to make maximum effort to achieve agreed buildup. Germany aware of British balance of payments problem and would attempt to be helpful. Schaeffer stated that German purchases of military equipment in UK would help British and that he would be prepared discuss this prospect.

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Stated that German problem could not be looked at in terms of just one year. In view internal political problems would be impossible to increase taxes enough to meet peak year of expenditures. Thus must have some leveling out through entire period.

Schaeffer repeated intention to get on with buildup and willingness to provide what it is practice for other host NATO countries to provide. This must be non-discriminatory.

Wilson emphasized difficulty of looking too far ahead and urged review situation from time to time. Had expected that German forces would be organized earlier. Stated hard for country explain need to keep large military forces away from home during peace. We must explain that this is part of common effort in which everyone is doing best he can. He felt it reasonable to review problem at this time.

German Defense Minister Blank stated that NATO has agreed to German 3–4 year buildup from January 1. This decision could not be reviewed. In 1956, 100,000 Germans would be mobilized and German government will need all available funds for this purpose. Next year financial gap will exist, solution concerning which is as yet unclear. Thus if support costs were paid it would mean that German forces could not be established at given sizes within given period.

French Finance Minister agreed must (1) be no discrimination against Germans and (2) equitable burden sharing. Stated that the legal aspects of Article 4, Section 4 of Finance Convention indicated possibility of goods and services but also did not exclude the possibility of specific financial sum. Recommended negotiation under Article 4 covering examination of overall estimate of contribution of each power under cost-sharing formula.

Schaeffer repeated opposition to any cash payments and referred to carryover from occupation costs of over 4 billion DM on May 5, 1955. Of this amount 2.4 being taken care of in current budget and balance would represent defense expenditure in next budget. This is in addition to other defense expenditures. Stated that if German people were told that German contingents could not be formed as fast as planned because funds needed for forces of other countries that this would have immediately adverse effects on 1957 election, with probable result that Ollenhauer would be next German Chancellor. Schaeffer stated that under “goods and services” he had in mind the use by forces of barracks, public buildings, land, etc.

Schaeffer related discussion to German contention that external aid will be required in order achieve buildup. More money spent on support costs would be result increase requirement for eternal aid. Accordingly Schaeffer stated he was prepared to initiate negotiations under Article 4 excluding possibility of cash payments. There should also be discussion of the gap and of prospects of German purchases of military equipment in EPU area.

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Boyle emphasized British foreign exchange problem and possible jeopardy to OEEC liberalization in absence of support costs. He said transfer of 80 million pounds for support UK forces Germany, three-quarters of which would have to be paid in gold, would place extraordinary strain on UK. Stated that German expenditures for FY starting April 1 would amount to 11.4 billion DM taking all items into account and maintained that this was not comparable to French and British effort. Therefore asked for extension of 3.2 billion DM support costs.

In reply to contention that visiting forces in Germany constituted only defense of Germany, without substantial cost to Germany, Schaeffer replied troops were in Germany to defend all free world. Strategy does not include defense of large part of Germany there is little validity to contention forces are in Germany in order to protect Germany. If the defense had to be made today, it would not include large part of Germany.

Schaeffer stated that 3.2 was “completely unacceptable” to Germany. No legal basis existed under Article 4 and it in fact would be publicly recognized as being discriminatory as no similar conditions existed in other NATO countries. Stated ready to negotiate re external aid, but was “senseless” to ask for support costs which would increase request for external aid. Gray asked whether 3.2 was “unacceptable” on fiscal or political grounds, and Schaeffer replied “both”, laying primary emphasis on political. Stated that proposal would require reopening plans for first year of buildup after these plans had been settled and agreed upon by NATO.

Pflimln said that French people would not understand if told must increase payments for troops in Germany when Germany has no forces. Maintained that 1955 and 1956 German percentage contribution smaller than UK and France. Recommended examination by experts (1) relation defense expenditures as percentage of GNP; (2) foreign exchange problems; and (3) possibility of procurement outside of Germany.

Lloyd urged early negotiations and stated that if there existed a marked disparity between German and other shares there would be unfavorable political repercussions in UK. In relation to UK military situation, failure to obtain support costs would involve dangers at which he had hinted. If contingency occurred, UK would do utmost to avoid them, but they could have bad effect on alliance as a whole. Wilson said sudden changes involved real difficulties. Recognized rapid buildup created difficulties for Germans. Sudden loss of support would involve difficulties for UK and some of different character for US. He appealed for effort to reach agreement in spirit compromise and understanding. He pointed out US had just had to reach [Page 48] difficult decision to increase defense budget, remarking we were not letting down our effort.

Schaeffer stated that German Government could not accept extension support costs regardless of justifications set forth because discriminatory. Should push forward strategy and therefore should put emphasis upon German buildup and not attempt to divert funds. Stated that Federal Republic prepared to render services and goods and commodities as in other host NATO countries. In case of Germany burden would be considerably larger because of number of allied troops stationed in Germany. As for opening negotiations under Article 4, stated he was prepared provided it was understood there would be no cash payments, and that goods and services would be furnished on same legal basis and same extent as provided by other host countries. Said he was prepared at any time to open negotiations on imports of military equipment and transfer problem, but would welcome negotiation on US aid first, because this necessary to clarify what Germans would have to buy abroad. Schaeffer stated that he had advised Secretary Humphrey that Germany would submit memorandum about January 155 making specific suggestions on additional external aid. He would be prepared to open discussions of Article 4 (on his terms) after that date. In reply to question by Lloyd as to whether Germans expected US reply to memorandum before opening Article 4 discussions, Schaeffer merely commented that it would be “helpful” if this could first be settled.

Wilson stated that support costs and external aid problems dissimilar. Aid is longer term problem. Today’s discussion only had to do with next couple of years. Therefore better to look at next two years and will then keep working together on future.

Gray stated that it would be dangerous to assume that proposed German note of January 15 would aid in solving this problem. US interested in knowing what Germany will buy in US. Was dangerous to assume possibility of additional grant aid that could influence availability of funds for goods and services. Wilson said it would confuse matter to link two subjects. If it were known that we were giving grant aid to relieve other burdens, it would cause difficulty in US.

Lloyd asked Germans for discussions in spirit of Article 3 of NATO6 to which Schaeffer replied that Article 3 meant effective self-help to build up forces plus provision to provide goods and services for allied forces.

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Schaeffer maintained that January 3 would be too early for negotiations for “technical reasons” (understand Schaeffer plans to go skiing) but would be prepared about middle of month. In reply to Wilson’s comment stated that realized question of whether Germany could obtain items from US for payment loan, lend-lease, etc. not related to Article 4 negotiations. This would effect transfer problem and German purchases of military equipment.

Lloyd stated he saw no possibility of agreement at this meeting. Lloyd stated problem serious and he would have to report to his government which might take it up in other ways. Boyle said Chancellor of Exchequer and Prime Minister would take serious view of it. Pflimlin supported Lloyd and stated that Schaeffer’s proposals would be discriminatory as Germany would not carry its full burden.

Lloyd and Pflimlin stated that they wished to make clear they did not accept Schaeffer’s interpretation of Article 4. Gray pointed out Secretary Wilson had several times stressed matter should not be approached on technical basis. US representative who had participated in drafting of Article 4 had informed him he did not agree with Schaeffer’s rigid interpretation. Schaeffer replied that German members who participated interpreted Article in manner he had set forth. On this inconclusive note meeting ended.

  1. Source: Department of State, Central Files, 740.5/12–1755. Secret. Approved by Reinstein; repeated to Bonn, London, and Heidelberg.
  2. At a luncheon meeting on December 15, Macmillan told Dulles that all members of the NATO alliance, including Germany, should bear equitably the costs of maintaining Allied troops in Germany. A summary of this conversation is in Secto 6, December 16. (Ibid., 740.5/12–1655)
  3. For text of Annex III, Conference Paper on “A German Defence Contribution and Arrangements to Apply to SACEUR’s Forces on the Continent” of the Final Act of the Nine-Power Conference, October 3, 1954, see Foreign Relations, 1952–1954, vol. v, Part 2, p. 1365.
  4. For text of the revised Finance Convention signed at the Nine-Power Conference, October 3, 1954, at London, see ibid., p. 1342.
  5. Not found in Department of State files.
  6. Article 3 of the North Atlantic Treaty states that the Allies will help each other to maintain and develop their collective capacity to resist armed attack.